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Transmittal - 5/3/2022ERIN MENDENHALL DEPARTMENT of COMMUNITY Mayor and NEIGHBORHOODS Blake Thomas Director SALT LAKE CITY CORPORATION 451 SOUTH STATE STREET, ROOM 404 WWW.SLC.GOV P.O. BOX 145486, SALT LAKE CITY, UTAH 84114-5486 TEL 801.535.6230 FAX 801.535.6005 CITY COUNCIL TRANSMITTAL ________________________ Lisa Shaffer, Chief Administrative Officer Date Received: 5/3/2022 Date sent to Council: 5/3/2022 ______________________________________________________________________________ TO: Salt Lake City Council DATE: May 3, 2022 Dan Dugan, Chair FROM: Blake Thomas, Director, Department of Community and Neighborhoods __________________________ SUBJECT: Briefing on unallocated HUD program income funds STAFF CONTACT: Tammy Hunsaker, Deputy Director, Community and Neighborhoods Department, 801-535-7244, tammy.hunsaker@slcgov.com Tony Milner, Director, Housing and Neighborhood Development Division, 801-535-6168, tony.milner@slcgov.com DOCUMENT TYPE: Information only RECOMMENDATION: Briefing and policy discussion BUDGET IMPACT: $12,000,000 in unallocated HUD program income BACKGROUND/DISCUSSION: As an Entitlement City, Salt Lake City (the “City”) annually receives federal block grant funding through the U.S. Department of Housing and Urban Development (“HUD”), including through the Community Development Block Grant (“CDBG”) and Home Investment Partnerships (“HOME”) programs. In addition to being an Entitlement City, the Housing and Neighborhood Development Division (“Housing Division”) is a Subrecipient of CDBG and HOME funds for City-led programs to preserve and expand affordable housing opportunities. The Housing Division’s two largest programs in scope and scale are the Home Repair and Homebuyer programs (the “Housing Programs”). Funds received back to the City because of a CDBG or HOME-funded activity are generally referred to by HUD as program income (“PI”). The Housing Programs have generated PI from the disposition of property and payments of principal and interest on loans made with CDBG and HOME funds. Lisa Shaffer (May 3, 2022 11:57 MDT) Lisa Shaffer PI funds retain their federal identity in perpetuity and are subject to all federal requirements. Approximately $1 to $1.5 million in PI generated from the Housing Programs has historically been included in the Housing Division’s annual budget and has been used for operating capital for the programs. However, more PI has been generated than was being budgeted annually, leaving a ~$12 million surplus in unused PI (the “Dormant PI”). The Administration recently became aware of Dormant PI and is working with HUD to recognize these funds. Of the ~$12 million in Dormant PI, $5.2 is attributed to the CDBG program and $6.8 is attributed to the HOME program. The practices that led to the accumulation of the Dormant PI have occurred over at least a decade, likely longer. While the Administration recognizes that PI practices need to be reformed, the Dormant PI presents an opportunity to strategically address the hastening housing crisis. During a time of critically low vacancy rates and skyrocketing housing costs, the Administration is proposing to prioritize funding to expand housing opportunities for the city’s most vulnerable residents and essential workers. Targeting these populations will assist in combating homelessness and provide opportunities for public servants to obtain housing in the communities in which they serve. To this end, this briefing provides an overview of the following: 1. Compliance and Best Practices – Process improvements to ensure compliance, transparency, and accountability. 2. Proposed Prioritization of Dormant PI – The Administration’s proposed priorities for the use of Dormant PI. 3. Plan Amendments – Process to amend the City’s Consolidated Plan and Annual Action Plan which is required to allocate the Dormant PI. 4. Next Steps – An overview of the next steps in the process to implement process improvements and allocate the Dormant PI to eligible projects. 1. Compliance & Best Practices On an annual basis, the Housing Division deploys millions of dollars to address critical needs within the city. The Housing Programs discussed herein have been in operation in one form or another since the 1990s and have assisted thousands of homeowners to either purchase a home or make critical life, safety, welfare repairs to their existing homes. The Dormant PI has been accumulating and left unused for several years. Moving forward, the City will align the utilization of PI with best practices, which is to substantially expend PI, to the extent practical, before drawing additional CDBG or HOME funds. An exception is when PI is placed in a HUD-approved revolving loan fund in accordance with certain requirements, in which case it is not required to be expended for non-revolving loan fund activities. In addition to the Housing Programs, the Housing Division administers other programs that are primarily targeted to low-income homeownership and rental stabilization. It is important to note that funds other than the Dormant PI have been closely tracked and monitored. Funding allocations, activities, and outcomes are annually documented though a HUD- required report called the Consolidated Annual Performance and Evaluation Report (“CAPER”). Additionally, funds and outcomes are periodically audited and closely monitored through HUD’s Integrated Disbursement and Information System (“IDIS”), a nationwide database that is used to track program activities and compile information for Congress. As a separate matter from HUD’s requirements, the Administration recognizes that various process improvements should be implemented to increase internal transparency and accountability across the Housing Division’s activities and programs. Refer to Exhibit A: Housing Division – Overview of Programs and Activities. Currently, the Council’s involvement typically ends with approval of funding allocations through the annual budget process. Moving forward, the Council may be interested in establishing program-level policies that guide the administration of funds after the annual budget process. To this end, the Administration is planning to engage the Council in future program-specific policy discussions with a goal of establishing legislative policies and reporting requirements. 2. Proposed Prioritization of Dormant PI The Dormant PI presents an opportunity to make a strategic impact as the City seeks to broaden the set of tools available to solve the housing affordability crisis. The Administration proposes to leverage the Dormant PI for the following target populations: i. Extremely low-income households with a focus on persons and families experiencing or at risk of homelessness. Activities could support housing for households at 50% and below of the area median income (“AMI”) and could connect individuals and families experiencing homelessness to permanent housing that may offer supportive services to maximize housing stability. ii. Essential services workers, such as firefighters, police workers, teachers, and librarians. Activities could support workforce rental and ownership housing to expand opportunities for public servants to live in the communities they serve. Efforts would leverage the Dormant PI with other resources to maximize impact. This would include the leveraging of surplus city property, public-private partnerships, and other public funding sources. Investments could be targeted to improve neighborhood livability and reduce crime through the redevelopment of distressed properties to remove undesirable land uses. Further, investments could be targeted to expand opportunity by connecting housing with resources that expand economic mobility, such as transit, living-wage jobs, healthy food, high-performing schools, safe neighborhoods, and green infrastructure. If the Council is supportive of these priorities, the Administration will provide a detailed proposal for consideration. Uses of funds will need to align with the 2020-24 Consolidated Plan (“Con Plan”) and Annual Action Plan and comply with respective CDBG and HOME regulations. Eligible housing activities could include new construction, rehabilitation, conversion (adaptive reuse to housing), direct homeownership assistance (i.e. mortgage financing), rental assistance, property acquisition, site improvements, infrastructure, and environmental remediation. 3. Plan Amendments The Administration has been working with HUD on the process to recognize and allocate the Dormant PI. As directed by HUD, the City will need to allocate the Dormant PI in a timely manner and to eligible uses. Further, the Dormant PI cannot simply be allocated but must also be spent within a reasonable timeframe. Amendments to the ConPlan and Annual Action Plan are required because, pursuant to HUD regulations, an amendment is required to carry out an activity or to spend funds not previously identified. Details are as follows: ● Consolidated Plan Amendment: The Con Plan identifies the City’s housing and community development needs and establishes activities and general budget allocations to address identified needs. There are two possible approaches for amending the scope of the Con Plan – amend the budget only or amend both the budget and eligible activities. Currently, eligible activities must support the five goals and corresponding strategies outlined in the Con Plan, including Housing, Transportation, Community Resiliency, Homeless Services, and Behavioral Health. Refer to Exhibit B: Con Plan Goals & Strategies for additional information. While these goals and strategies are universal to all the block grants covered by the Con Plan (CDBG, HOME, ESG, HOPWA), the PI will need to be allocated to activities allowed under the program the PI was generated under. As such, $5.2 will need to be allocated to CDBG-eligible activities and $6.8 will need to be allocated to HOME-eligible activities. ● Annual Action Plan Amendment: In addition to amending the Con Plan, HUD will also require an amendment to the Annual Action Plan which identifies annual funding expenditures to carry out the Con Plan goals for each program year. The amendment will include the specific funding allocations to programs and projects. An overview of the requirements for eligible use of CDBG and HOME funds is as follows, with additional detail provided as Exhibit C: Eligible Uses of Funds. CDBG PI ($5.2 million) HOME PI ($6.8 million) ELIGIBLE ACTIVITIES ● Housing Activities ● Neighborhood Improvements ● Economic Development ELIGIBLE ACTIVITIES ● Housing Financing ● Housing Development ● Rental Assistance NATIONAL OBJECTIVE ● Benefit low and moderate-income (“LMI”) persons ● Prevent or eliminate slum & blight ● Meet an urgent need ELIGIBLE BENEFICIARIES ● Homeownership: 80% AMI < ● Rental: 60% AMI < ● Certain 50% AMI requirements 2020-2024 CONSOLIDATED PLAN ● Identifies housing & community needs. ● Identifies 5-year goals to address needs ● Uses of funds needs to support the Con Plan. It is important to note that the chart does not include “public services” as an eligible activity for CDBG. Typically, HUD regulations allow for up to 15% of the total CDBG award for that year plus 15% of the program income received from CDBG in the prior year for public services to nonprofit organizations. The amount of CDBG Dormant PI generated on an annual basis is unable to be determined. As such, it is impossible to know how much of the CDBG PI would be eligible for public services. Likewise, it is impossible to determine how much CDBG and HOME PI would be available for “planning and administration,” which is typically 20% for CDBG and 10% for HOME. As such, HUD has advised the City to allocate the PI to eligible uses other than public services, planning, and administration. 4. Next Steps i. The Council may wish to provide policy direction on the Administration’s proposed priorities for the Dormant PI, which is to expand housing opportunities for the city’s most vulnerable residents and essential workers. If the Council is supportive of these priorities, the Administration will provide additional detail on proposed projects and activities for the Council’s consideration. ii. The Administration will initiate the process to amend the Con Plan and Action Plan. The scope of this amendment will depend on the anticipated uses of the Dormant PI. The Administration’s proposal to expand housing opportunities for target populations would only require an amendment to the budgets, as housing development and preservation activities are already eligible uses of funds. iii. The Administration will transmit information to the Council on the Housing Division’s programs and activities, as the Council may wish to engage in policy discussions on program-level policies that guide the administration of funds after the annual budget process. PUBLIC PROCESS: The City will carry out a public process to amend the Con Plan and Annual Action Plan. This process will include a 30-day public notice process with outreach efforts largely determined by the Citizen Participation Plan (“Participation Plan”) that is included in the current Con Plan. The Participation Plan outlines the public’s involvement in an amendment and encourages involvement by people with low income, especially in low-income neighborhoods and areas where CDBG money might be spent. The City’s Participation Plan includes the following requirements: 1. Press Releases issued by the Office of the Mayor; 2. Written Public Notices, provided in both English and Spanish; 3. Posting of written Public Notices on the State’s Public Notice website; 4. Email to the Housing Division’s comprehensive contact list consisting of residents, past and present grant applicants, government officials, Council liaisons, interested parties, Community Councils, local neighborhood groups, and City departments; 5. Post announcements, information, and documents to the City’s Housing and Neighborhood Development website; 6. Information released via the City’s social media accounts; 7. Follow the City’s Public Engagement Guide; 8. The City will use electronic means wherever applicable to reduce the requirement for in person noticing or engagement. Once this public process concludes, the Council will hold a public hearing and consider the amended Con Plan and Annual Action Plan for adoption. EXHIBITS: A. Housing Division – Overview of Programs and Activities B. Con Plan Goals & Strategies C. Eligible Uses of CDBG and HOME PI Funds AcquisitionNew ConstructionSubstantial RehabMinor RehabHomebuyer Assis.Mortgage Rental AssistanceHomeless Assis.Property DiscountDeveloper Homeowner LoanFee WaiverGrantCommunity Development Block Grant (CDBG) Federal HUD funding Citywide Administers funding to programs that address a wide variety of community needs, including housing assistance and rehabilitation. 80% AMI and below No requirement X X X X X X 2020-24 Consolidated Plan Emergency Solutions Grant (ESG)Federal HUD Funding Citywide Administers funding to programs that provide homelessness services and prevention.Individuals experiencing homelessness; 30% AMI and below N/A X X X 2020-24 Consolidated Plan HOME Investment Partnership Program (HOME) Federal HUD funding Citywide Administers funding to programs that provide a wide-range of housing activities, including new construction, rehabilitation, and rental assistance. ~60% AMI and below 5-20 years for rental and homebuyer projects; N/A for rental assistance X X X X X X X 2020-24 Consolidated Plan Housing Opportunities for Persons with AIDS (HOPWA) Federal HUD funding Salt Lake, Tooele Counties Administers funding to programs that provide assistance, to people living with HIV/AIDS.80% AMI and below N/A X X 2020-24 Consolidated Plan CARES HUD-COVID (CDBG-CV, ESG-CV, and HOPWA-CV Federal HUD funding Citywide (HOPWA includes Salt Lake, Tooele Counties) Administers funding to programs that address a wide variety of community needs, including: mortgage assistance (CDBG-CV), homeless services and prevention, and rental assistance (ESG-CV), and housing assistance to people living with HIV/AIDS (HOPWA-CV). 80% AMI and below (CDBG-CV, HOPWA- CV) and 50% AMI and below (ESG-CV) N/A (CDBG-CV, ESG-CV, HOPWA-CV)X X X X 2020-24 Consolidated Plan Funding Our Future Initiative - Housing Sales tax revenue Citywide Funding support for housing programs that align with alignment with goals and objectives outlined in Salt Lake City’s Housing Plan, Growing SLC. 80% AMI and below (For DPA programs, the AMI is up to 120%) 5-10 years for down payment assistance X X X X X X N/A City-Owned Property for Affordable Housing N/A Citywide Facilitates the development of affordable housing through the utilization and/or disposition of surplus city- owned property. Varies No Requirement; case-by-case basis X X X SLC Ordinance Chapter 2.58 Community Commitment Program General Fund Citywide Addresses the ongoing challenge of homelessness by implementing both long- and short-term solutions with the goal of creating safety for everyone in our public spaces. Individuals experiencing homelessness N/A X X N/A Community Land Trust Sales tax revenue, CDBG, CDBG Program Income Citywide City-owned property may be placed into the trust; homebuyers purchase the housing unit and lease the land from the City. 80% AMI and below Perpetuity X X SLC Resolution 12 of 2017 COVID Housing Stability Program - GF General Fund Citywide Provides rapid re-housing, homeless prevention rental assistance & mortgage assistance to stabilize SLC households experiencing a financial hardship due to COVID-19. 60% AMI and below 5 years for mortgage assistance X X X X N/A Emergency Rental Assistance Program (ERAP) Treasury Citywide ERAP provides funding for low-income households at risk of housing instability during the COVID-19 pandemic. 80% AMI and below, with a priority for 50% AMI or lower N/A X N/A Fix the Bricks Federal FEMA Funding Citywide Funding facilitates seismic improvements for unreinforced masonry homes (URM's). No AMI criteria None X X N/A Handyman Program CDBG Citywide Seniors, persons with disabilities, and low income households are eligible for assistance ($1,000 or less per year) with small household repairs. 80% AMI and below None X X N/A Home Buyer Program CDBG program income, HOME program income Citywide Mortgage financing for low and moderate-income households to further affordable homeownership.50% to 80% AMI None X X N/A Home Development Fund HOME, HOME program income Citywide Loans for acquisition, new construction and rehabilitation activities.80% AMI and below 20 years for rental and homebuyer projects X X X X X X N/A Home Rehabilitation Program CDBG Citywide Provides grants and loans to low and moderate-income households to address code issues including health, safety, and structural deficiencies. 80% AMI and below None X X X N/A Impact Fee Waivers N/A Citywide Facilitates the waiver of impact fees for affordable housing; Waiver varies by affordability level.100% AMI and below Varies X X X SLC Ordinance Chapter 18.98 Neighborhood Business Improvement Program CDBG Target Areas Provides up to $50,000 in grants to improve the façades of local businesses. LMI census tract If over $25,000 then a 5 year period.X X X N/A Renovation Pilot Program (Renter Rehab Program) tax increment (one-time funding) Citywide Loans for improvements to existing affordable housing in exchange for a guaranteed period of affordability.25% of the units to be restricted at 60% AMI and below 30 years X X N/A State Homeless Mitigation Grant Activities State Citywide, with focus on Ballpark and Central City State grant funds case managers and community liaisons who serve all City residents, with specific emphasis on building community in the homeless resources center ("HRC") host neighborhoods. N/A N/A X X N/A Targeted Repair Program CDBG Citywide Grant of up to $50,000 to repair major structural and/or mechanical component deficiencies in their home.80% AMI and below If over $25,000 then a 5 year period.X X N/A Note: Low and Moderate-Income ("LMI") is defined as 80% of the Area Median Income ("AMI") and below. Down Payment Assistance ("DPA") can typically be provided to households up to 120% of the AMI per federal regulations. Note: Although all of the Programs listed under "Funding Administration" are provided as "grants", funds are not always provided to the end-user as grants. As such, the City generates and/or receives program income from some of these Programs. EXHIBIT A: HOUSING DIVISION - OVERVIEW OF PROGRAMS & ACTIVITIES INCENTIVE TYPE AFFORDABILITY TERM SCOPE AMI CRITERIAPROGRAMSOURCE OF FUNDING GEOGRAPHY Note: All housing activities are guided by the city's housing plan, Growing SLC: A 5-Year Housing Plan. Note: Federal or state regulations are attached to the majority of funding sources.DIRECT PROGRAMS & ACTIVITIESSLC LEGISLATIVE POLICY OVERVIEW FUNDING ADMINISTRATION EXHIBIT B: CON PLAN GOALS & STRATEGIES For a CDBG or HOME activity to be eligible for funding, it must align with the Needs, Goals, and Strategies outlined in the City’s 5-year Consolidated Plan. The following goals and strategies have been adopted in the 2020-2024 Consolidated Plan: Housing Goal: To provide expanded housing options for all economic and demographic segments of Salt Lake City’s population while diversifying the housing stock within neighborhoods. Strategies: ● Support housing programs that address the needs of aging housing stock through targeting rehabilitation efforts and diversifying the housing stock within neighborhoods ● Support affordable housing development that increases the number and types of units available for income eligible residents ● Support programs that provide access to home ownership via down payment assistance, and/or housing subsidy, and/or financing ● Support rent assistance programs to emphasize stable housing as a primary strategy to prevent and end homelessness ● Expand housing support for aging resident that ensure access to continued stable housing Transportation Goal: To promote accessibility and affordability of multimodal transportation options. Strategies: ● Improve bus stop amenities to encourage the accessibility of public transit and enhance the experience of public transit in target areas ● Support access to transportation prioritizing very low-income and vulnerable populations ● Expand and support the installation of bike racks, stations, and amenities as a way to encourage use of alternative modes of transportation in target areas Build Community Resiliency Goal: Build resiliency by providing tools to increase economic and/or housing stability. Strategies: ● Provide job training/vocational training programs targeting low-income and vulnerable populations including, but not limited to; chronically homeless; those exiting treatment centers/program s and/or institutions; and persons with disabilities ● Economic Development efforts via supporting the improvement and visibility of small businesses through façade improvement programs ● Provide economic development support for microenterprise businesses ● Direct financial assistance to for-profit businesses ● Expand access to early childhood education to set the stage for academic achievement, social\development, and change the cycle of poverty ● Promote digital inclusion through access to digital communication technologies and the internet ● Provide support for programs that reduce food insecurity for vulnerable population Homeless Services Goal: To expand access to supportive programs that help ensure that homelessness is rare, brief, and non-recurring. Strategies: ● Expand support for medical and dental care options for those experiencing homelessness ● Provide support for homeless services including Homeless Resource Center Operations and Emergency overflow operations ● Provide support for programs providing outreach services to address the needs of those living an unsheltered life ● Expand case management support to connect those experiencing homelessness with permanent housing and supportive services Behavioral Health Goal: To provide support for low-income and vulnerable populations experiencing behavioral health concerns such as substance abuse disorders and mental health challenges. Strategies: ● Expand treatment options, counseling support, and case management for those experiencing behavioral health crisis ● Support programs that provide connection to permanent housing upon exiting behavioral health programs. Support may include, but is not limited to supporting obtaining housing via deposit and rent assistance and barrier elimination to the extent allowable to regulation EXHIBIT C: ELIGIBLE USES of CDBG & HOME PI FUNDS CDBG PI FUNDS ELIGIBLE ACTIVITIES CON PLAN ELIGIBLE TYPICAL NATIONAL OBJECTIVE DETAILS HOUSING Rehabilitation: Single and Multi-Unit Residential YES LMI households; prevent or eliminate blight; meet unfunded, urgent local need May rehabilitate or reconstruct or convert structures, provide homeownership assistance, and housing counseling. Includes all activity costs such as applicant intake, construction specs and procurement, and construction. All activities must result in achievement of a CDBG national objective, typically by providing housing to an LMI household. Construction of Housing (limited) YES Direct Homeownership Assistance YES Housing Counseling YES Public Housing Modernization YES Energy Efficiency Improvements YES Rehabilitation Administration YES Lead-Based Paint/Lead Hazard Abatement YES Code Enforcement YES PUBLIC IMPROVEMENTS & FACILITIES Senior Centers NO LMI households; prevent or eliminate blight; meet unfunded, urgent local need May acquire, construct, reconstruct, or rehabilitate a public facility or improvement. All activities must result in achievement of a CDBG national objective, typically by providing access to a facility or improvement to an LMI clientele or to LMI persons residing in a qualified area. Facility for Persons with Disabilities NO Homeless Facilities (not operating costs) NO Youth Centers/Facilities NO Neighborhood Facilities YES Parks, Recreational Facilities YES Parking Facilities YES Solid Waste Disposal Facilities NO Flood and Drainage Facilities NO Water/Sewer Improvements NO Sidewalks YES Child Care Centers NO Fire Stations/Equipment NO Health Facilities NO Removal of Architectural Barriers NO PROPERTY ACQUISITION Acquisition of Property YES LMI persons, families, or area; prevent or eliminate blight; meet unfunded, urgent local need May buy, clean up, demolish, dispose of, and relocate occupants from a property for an eligible public purpose. Disposition YES Clearance and Demolition YES Clean-up of Contaminated Sites/Brownfields YES Relocation YES ECONOMIC DEVELOPMENT Commercial/ Industrial Building Rehabilitation YES LMI persons, families, or area; businesses providing LMI jobs or services; prevent or eliminate blight; meet unfunded, urgent need May assist commercial or industrial activities. All activities must result in achievement of a CDBG national objective, typically by creating or retaining permanent LMI jobs or serving an LMI area. Project examples range from working capital loans, to neighborhood store expansion. Commercial/Industrial Land Acquisition/ Disposition NO Commercial/Industrial Infrastructure Development NO Commercial/Industrial Building Construction NO Micro-Enterprise Assistance NO Note: Public Services and Administration/Planning activities are not listed, as they cannot be funded with the Dormant PI. Note: "LMI" is low and moderate-income, which is generally defined as 80% of the area median income (“AMI”) and below. Note: CDBG funds for Housing activities must be utilized for permanent housing and not transitional or emergency shelters. Housing activities for multifamily units are limited to new construction. Rehabilitation and new construction activities are eligible for single-family and duplexes. HOME PI FUNDS ELIGIBLE PROJECTS CON PLAN ELIGIBLE ELIGIBLE BENEFICIARIES TYPES OF ASSISTANCE Tenant Based Rental Assistance (TBRA) YES Tenant-Based Rental Assistance limit 60% AMI. Development and Homebuyer assistance limit is 80% AMI<. 5 or > units: 20% of units must be at 50% AMI <. All funds must be for 80% AMI and below. Can be used on mixed income developments, number of affordable units is based on Funding amount. HOME allows multiple forms of financial assistance or subsidy: grants, loans, interest subsidies, loan guarantees, equity investments to be provided for eligible projects. Once a commitment is made with HOME PI funds, the project must be completed in a four- year timeframe. New Construction- Rental & Homeownership YES Rehabilitation YES Reconstruction YES Program Staff - Specific to TBRA YES Acquisition YES Project Related Soft Costs YES Homebuyer Assistance; DPA or Acquisition YES Note: Any construction, rehabilitation, soft costs, and acquisition costs are eligible as part of a complete project not stand alone costs. Note: Rehabilitation includes conversion to an existing structure, adaptive reuse, site improvements & infrastructure. Note: Tenant-Based Rental Assistance is referred to as “TBRA”, Down-Payment Assistance is “DPA”.